US labor market defies interest rate hikes as job openings rise in July

A restaurant advertising job seeks to attract workers in Oceanside, California, U.S., May 10, 2021. REUTERS/Mike Blake/File Photo

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  • Job vacancies rise by 199,000 to 11.239 million in July
  • June data revised to 11.040 million from 10.698 million
  • Consumer confidence rose in August; purchase plans increase
  • Annual house price growth remains strong in June

WASHINGTON, Aug 30 (Reuters) – U.S. job openings rose in July and data for the previous month was revised upwards, indicating continued strong demand for labor that allows the Reserve federal government to maintain its aggressive interest rate hikes.

The Labor Department’s Job Openings and Labor Turnover Survey, or JOLTS report, showed on Tuesday that there were two jobs for every unemployed worker last month, indicating extremely tight conditions in the labor market. He suggested that fears that the economy was in recession after two consecutive quarterly declines in gross domestic product were greatly exaggerated.

“The Fed has accelerated its monetary restriction this year to an unprecedented degree and the economy gives it no reason to hold back,” said Christopher Rupkey, chief economist at FWDBONDS in New York. “The job market is strong as a bull, two jobs for the unemployed to choose from.”

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Job postings, a measure of labor demand, rose by 199,000 to 11.239 million on the last day of July. June data has been revised up to show 11.040 million job openings instead of the 10.698 million previously reported. Economists polled by Reuters had forecast 10.450 million vacancies.

Last month, there were 81,000 additional job openings in transportation, warehousing and utilities. Job openings increased by 53,000 in the arts, entertainment and recreation sector, while federal government had 47,000 additional openings and state and local education had 42,000 additional unfilled jobs. , before the new school year.

But job creation fell by 47,000 in the durable goods manufacturing industry. There were more job openings in the West, while the South and Midwest saw small gains. Vacancies fell in the Northeast.

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The Fed is trying to calm labor demand and the overall economy to bring inflation back to its 2% target.

Fed Chairman Jerome Powell warned last week that Americans were heading for a painful period of slow economic growth and possibly rising unemployment as the US central bank aggressively raised interest rates in the aim of rebalancing supply and demand. The Fed has raised its key rate by 225 basis points since March.

The job creation rate climbed to 6.9% last month from 6.8% in June. Hiring slipped to 6.382 million from 6.456 million in June, keeping the hiring rate unchanged at 4.2%. The gap between jobs and workers narrowed to 3.4% of the labor force, from 3.1% in June.

Layoffs fell to 1.398 million from 1.400 million in June. There were declines in leisure and hospitality, professional and business services, and financial activities. These offset a surge in the trade, transport and utility industries.

About 4.179 million people left their jobs, compared to 4.253 million in June. The quit rate, seen by policymakers and economists as a measure of confidence in the job market, fell to a 14-month low of 2.7% from 2.8% in June.

Yet, confidence in the labor market remains high. A separate Conference Board report showed on Tuesday that its so-called labor market differential, derived from data on respondents’ opinions of whether jobs are plentiful or hard to get, fell slightly to 36.6 this this month against 36.8 in July.

This measure is correlated to the Department of Labor’s unemployment rate.

US stocks fell on the data. The dollar remained stable against a basket of currencies. US Treasury prices were mixed.

CONSUMER CONFIDENCE REBOUNDS

“Markets will misinterpret this report as an indication that the Fed will raise rates more than expected,” said Jamie Cox, managing partner at Harris Financial Group in Richmond, Va. “The Fed is error prone and there is a very good chance that inflation will fall for reasons other than rate hikes.”

The Conference Board’s overall consumer confidence index rebounded to 103.2 this month from 95.3 in July, ending three straight monthly declines. Economists had expected the index to rise to 97.7. Consumer inflation expectations over the next 12 months fell to 7.0% from 7.4% in July.

Despite high inflation expectations, the share of consumers planning to go on vacation in the next six months hit an eight-month high.

There has also been an increase in the share of consumers planning to buy motor vehicles as well as major household appliances like refrigerators, washing machines, dryers and televisions over the next six months. which could keep consumer spending buoyant in the third quarter and economic growth.

Gross domestic product fell at an annualized rate of 0.6% last quarter after contracting at a 1.6% pace in the January-March quarter.

“The recession talk hasn’t gone away, but it’s certainly gotten a little quieter lately,” said Jennifer Lee, senior economist at BMO Capital Markets in Toronto.

Rising mortgage rates resulting from the Fed’s aggressive monetary policy did not deter potential buyers in August as more consumers planned to buy homes in the next six months, likely encouraged by lower asking prices. by sellers.

This slows the pace of monthly house price inflation.

A third report on Tuesday showed the S&P CoreLogic Case-Shiller National Home Price Index rose 0.3% in June after accelerating 1.3% in May. This reduced the annual increase to 18.0%, from 19.9% ​​in May. Prices have slowed significantly in the West, with monthly declines in Seattle and San Francisco.

The slowdown in monthly house price growth was evident in a fourth Federal Housing Finance Agency report showing prices rose 0.1% after rising 1.3% in May. In the 12 months to June, prices rose 16.2% after jumping 18.3% in May.

With supply still tight, house price growth is expected to continue, albeit with a few months of negative readings.

“Even with a few months of outright decline, however, home prices will likely end the year solidly in positive territory,” said Mark Vitner, senior economist at Wells Fargo in Charlotte, North Carolina.

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Reporting by Lucia Mutikani; Editing by Paul Simao and Andrea Ricci

Our standards: The Thomson Reuters Trust Principles.


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